Amplats likely to sell or shut Union mine

Anglo American will announce a revival plan for its platinum arm Amplats on Tuesday, a spokesperson said.

The world's top producer of the precious metal also said on Monday it likely fell to a full-year loss because of costly strikes.

The review had widely been expected to lead at least some shaft closures due to soaring costs and falling profits. But closures could risk a new wave of labour unrest, with the militant Association of Mineworkers and Construction Union (Amcu) threatening to close operations like it did last year if the review leads to shutdowns and job losses.

The Union mine, which is 85% owned by Amplats, is likely to be the "most dramatically affected" by the plan, said the source, who declined to be identified because the information is not yet public.

Amplats is unlikely to make sweeping changes at any of its 100% owned mines, said the source.

Union produced 254 000 ounces of platinum in 2011 and employs around 7 800 people.
It is divided into Union North and Union South and one analyst said the northern wing was less profitable and the most likely candidate for closure.

A spokesperson for Amplats said the review was due to be announced on Tuesday, but declined to comment further.

Shaft closures could reignite violence along the platinum belt. Violence linked to wildcat action on South Africa's mines last year killed around 50 people.

"We remain concerned regarding the company's ability to initiate operational changes given the current South African social and political environment," said Justin Froneman, a platinum analyst at SBG Securities in Johannesburg.

Amplats said on Monday it lost 306 000 ounces of output last year - about 12-13% of expected production - due to illegal strikes which were part of a wave of labour unrest that hit many of South Africa's gold and platinum mines.

Froneman and other analysts expect Amplats to close shafts that produce about 200 000 ounces per year, though the cuts could be deeper and might also focus on struggling mines around the restive platinum belt city of Rustenburg about 120 km northwest of Johannesburg.

Evans Ramokga, an Amcu organiser based in Rustenburg, told Reuters that the rank and file could accept the sale of assets as such a move could preserve jobs but would react to closures with sympathy strikes on other shafts.

Unions and the company will meet to discuss the results of the review on Tuesday.

Closing Amplats' shafts could help lift the spot price of the white metal, which is used in auto catalysts to reduce pollution. Amplats accounts for about 40% of the global supply of platinum, whose price has tumbled since 2008, mostly because of sluggish car demand in Europe.

Platinum prices hit a three-month high on Monday as speculation about further supply outages in major producer South Africa sparked buying, pushing the metal back towards parity with gold.

Tough conditions
With Amplats' Rustenburg operations employing close to 20 000, closure of two of the more labour-intensive mines could translate into job cuts of up to 10 000. The review was commissioned almost a year ago and Anglo has three broad options: it can spin off Amplats; it can do little and hope profits rebound; or it can close loss-making shafts to create a nimbler, profitable business.

Monday's trading update highlights the difficulties it faces. Amplats said it expected to report a headline loss of 491 to 628 South African cents per share for the year ended December, compared with a profit of 1 365 cents a year earlier.

A poll of 10 analysts by Thomson Reuters forecast earnings of 190 cents per share for diluted headline earnings, meaning the market had expected the company to eke out a small profit for the full year.

Amplats' share price was down almost 2% in afternoon trade. In addition to lower sales, Amplats said it was also hit by a decline in platinum prices. The company said it would also write down the value of some projects not considered economically viable by R6.6-billion. – Reuters